“An unforeseen event emerged in 2022 with the Russia-Ukraine conflict which has materially impacted our business and resulted in the legally required termination of six aircraft lease agreements with a Russian customer.
“One of the aircraft has been recovered. However, five aircraft remain under the illegal control of the Russian operator and have been fully impaired and subject to an insurance claim to be filed,” the company said.
The report has no details of where the aircraft are or who the customer is. Airwork has been contacted for comment.
Earlier this year Reuters reported more than 400 aircraft, worth almost US$10 billion, ($16.3b) have been stuck in Russia after Western countries imposed sanctions on the country over the war in Ukraine - and Russian aircraft lessees did not return the jets.
Insurers are balking at payouts, alleging in part that there has not been a physical loss of the planes yet, that the jets and engines are no longer subject to a lease agreement and that Western sanctions prevent them from providing cover, the agency reported.
Airwork was bought six years ago by a Chinese conglomerate and maintains planes and helicopters and provides charter services.
It has reported an after-tax net loss of $253m for the 12 months to December 2022 compared with a $4.2m loss the previous year.
The financial statements, dated May 31, also reveal the extent of impairment expenses relating to Greek-based Olympus Airways.
Last year it recovered two A321 aircraft leased to Olympus but it found maintenance had not been adequately performed. These aircraft have been revalued to the expected sale price less costs to sell which resulted in an impairment charge of $25m.
In December last year Airwork determined that two 757s previously intended for freight conversion were no longer able to be converted in an economic manner due to parts no longer being readily available for freight conversion. The aircraft were written down with an impairment charge of $14.5m.
Two Boeing 737 aircraft in its fleet were also found to require significant investment to extend their lives and it was uneconomic to do so. These aircraft have been written down by $17.7m.
In commentary, it said that during 2022, it executed a number of new leases around the world but its lease yield fell due to the impact of losing aircraft in Russia, aircraft coming off lease and the impact of rising interest rates.
A massive Antonov An-225 Mriya was an early aviation casualty of Russia's invasion of Ukraine. Photo / AP
Total revenue fell from $204m to $184m in the latest year.
Last year the company sold its helicopter business to focus on its fixed-wing operation which showed greater resilience during the pandemic.
Airwork said it continued to benefit and be supported by its shareholder and bank syndicate which provided access to diverse sources of equity and debt funding.
Airwork traces its history to 1936 when it began operations out of Wellington.
Once NZX listed, it was bought by a Chinese conglomerate six years ago for $270 million. China’s Zhejiang Rifa acquired the Airwork in 2017 having earlier snapped up 75 per cent of the business in a partial takeover. Rifa is controlled by Jie Wu, whose family’s net worth was valued by Forbes at US$1.12 billion ($1.8b) in 2018.
Grant Bradley has been working at the Herald since 1993. He is the Business Herald’s deputy editor and covers aviation and tourism.
